Optimism Spikes for California’s Multi-Family Real Estate Market

Optimism Spikes for California’s Multi-Family Real Estate Market


– As of six months ago optimism for California’s
multi-family housing market increase yet again due
to increased job growth. Especially, in the large costal cities. With higher rents and
higher occupancy rates that will induce even more construction. We talked to the experts,
and here’s our report. So, the market for multi-family housing in California has really taken off and that’s because job growth has been in the denser parts of California along the coast. – You’ve now had, what? Five plus years of economic growth. People have more money. Interest rates are still historically low. – A lot of capital in the markets, lot of demand from our customers. Job growth is improving. Rents are improving. Occupancies are improving. It’s actually a very, very
good time to own multi-family. – The residential development
market’s been fantiastic and residential projects that if you own a residential project the values are tremendous. – The biggest difference in the surveys quite frankly was the increased amount of optimism in San Francisco. I mean, it went from being, you know, relatively optimistic around a 60% number to highly optimistic about an 80% number. – So, what’s interesting about our survey of
multi-family housing developers is that they’re highly optimistic but they have not been acting as much on that optimism as one might expect. – In northern California in particular pricing is off the charts. New construction costs have gone way up and we’re starting to
get a little concerned that we’re getting a little long in the tooth in this cycle for the apartment business not necessarily for the economy but rather for apartment pricing and the fundamentals of
apartment investment. – In California rents are going up and one could say, well how
can one afford those rents? That’s rents per square foot and the way in which you afford that is to economize on your use of space. – People are interested in smaller units. I think that’s a function
of rising rents, right? So we’re seeing people focus on the whole dollar
rent that they’re paying we saw a lot of people
double up, take roommates in trying to reduce their housing costs. – People are always gonna want to get out on their own and it’s a question of what can they afford? And as the price of
those single family units becomes higher and higher the answer is well, you can afford a rental unit and in some cases you might
want a newer rental unit but it’s gonna be smaller. – The demand is forcing up rents and is really creating a situation where we expect and our developer panels expect a multi-family construction to accelerate over the
coming couple of years.

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